I bought a GTI in December after VW bought back my diesel Sportwagen and can share my biased experience, focusing on that model. I thought I would replace it with a German or Swedish used wagon, but couldn't find anything that I liked as much as the GTI and the GTI actually had more back seat space than lightly used compact wagons from Volvo, BMW and Audi. I heavily considered going with a Golf R as I love them and the understated styling. In the end I settled on the GTI as it is lighter and more fun around town and I already had a set of snow tires from the Sportwagen so I wasn't as concerned about not having AWD. Most of my driving is city, so I wouldn't see the performance benefits on a daily basis and would sacrifice mileage. R also has higher limits so you have to drive it harder to get the same fun out of it. I just couldn't justify the extra $8-10k at this point in my life, but perhaps next time.
I have an 8 and 10 year old and they fit just fine in the car's back seats. I plan to keep it for 6+ years and don't have concerns as it has a nicely sized back seat for it's class. Cargo space behind the back seat is superior to compact sedans and isn't bad. The space isn't super deep, but it is tall thanks to the boxy profile. Very good space with seats folded down. I have a large Yakima Skybox that I can fit with the factory cross bars that I bought for longer trips. The OEM bars can be installed/removed in minutes.
I have an SE without the Performance Pack. Base models have an electronic limited slip which gives good grip. PP models have a real limited slip, which is reportedly very good. Car corners very nicely and is tossable/fun to drive. Several sources have dino'd the car and the power is underrated from the factory. Actual HP at the crank is more like 240+ with actual torque in the 280 range. The six speed dual clutch automated manual transmission is incredible, ripping off lighting fast shifts. It can function as an automatic, but it is not a regular torque converter auto. 6 speed manual is reportedly very nice. You can spend $500 on a tune and boost this substantially with little sacrifice in reliability. Which gets us to.........
VW/Audi has come a long way in the past decade and a half in reliability according to all of the rating sites. They are now mid pack, so still not Honda/Acura reliable. This is my second VW after 20 years of driving Honda's and Acura's and so far so good. Just keep in mind that with a German car you can't neglect service like you can with a Honda. Do everything by the book, follow recommended fluids, intervals, etc.... DSG service is $500 every 40,000 miles. Just know up front that maintenance will be slightly more involved in a German car.
I am a 40+ year old Architect and didn't consider alternatives like the WRX or Focus ST/RS as the styling of those cars didn't appeal to the design snob in me. My Midnight blue GTI is just under the radar enough and the interior quality is Audi-like. Nice plastics and a very rational layout. Exterior design won't feel dated in 8 years.
In the end, I didn't consider sedans as I like the utility of 5 doors and didn't consider SUV's as I like the fun of cars, so my options were narrowed. I never considered the E350 estate, but perhaps I should have. Nice looking cars. Good Luck!